Deep-tech startups in sectors such as aerospace, semiconductors and biotech take much longer to mature than conventional ventures. Because of that, India is adjusting its startup rules and mobilizing public capital in hopes of helping more of them move on to commercial products.
This week, the Indian government updated its startup framework, doubling the period during which deep tech companies are treated as start-ups to 20 years and raising the revenue threshold for startup-specific tax, subsidy and regulatory benefits to INR 3 billion (about INR 33.12 million), from INR 1 billion (about $11.04 million) previously. The change aims to align political timelines with the long development cycles typical of science and engineering-led companies.
The change is also part of New Delhi’s efforts to build a long-term deep tech ecosystem by combining regulatory reform with public capital, including the INR 1 trillion (about $11 billion) Research, Development and Innovation Fund (RDI) announced last year. This fund is intended to expand patient funding for science-led and R&D-driven companies. Against that backdrop, American and Indian venture firms later joined forces to launch the India Deep Tech Alliance, a more than $1 billion private investor coalition that includes Accel, Blume Ventures, Celesta Capital, Premji Invest, Ideaspring Capital, Qualcomm Ventures and Kalaari Capital, with chipmaker Nvidia serving as an adviser.
For founders, these changes can remedy what some see as an artificial pressure point. Under the previous framework, companies often risked losing startup status while still pre-commercial, creating a “false error signal” that evaluated science-led ventures on political timelines rather than technological progress, said Vishesh Rajaram, founding partner at Speciale Invest, an Indian deep tech venture capital firm.
“By formally recognizing deep tech as different, the policy reduces the friction in fundraising, trailing capital and engagement with the state, which absolutely manifests itself in a founder’s operational reality over time,” Rajaram told TechCrunch.
Still, investors say access to capital remains a more binding constraint, especially after the early stages. “Historically, the biggest gap has been funding depth in Series A and beyond, especially for capital-intensive deep tech companies,” Rajaram said. This is where the government’s former FUI fund must play a complementary role.
“The real benefit of the RDI framework is to increase the funding available to early and growth stage deep tech companies,” said Arun Kumar, managing partner at Celesta Capital. By channeling public capital through venture funds with tenors similar to private capital, he said, the fund is designed to address chronic gaps in follow-on funding without changing the commercial criteria that guide private investment decisions.
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Siddarth Pai, founding partner at 3one4 Capital and co-chairman of regulatory affairs at the Indian Venture and Alternate Capital Association, said India’s deep tech framework avoids a “graduation cliff” that has historically cut companies off from support as they scale.
These policy changes come as the RDI fund begins to take shape operationally, Pai said, with the first group of fund managers identified and the process of selecting venture and private equity managers underway.
While private capital for deep tech already exists in India — particularly in areas like biotech — Pai told TechCrunch that the RDI Fund is intended to act as a nucleus around which larger capital formation can occur. Unlike a traditional fund-of-funds, he noted, the vehicle is also designed to take direct positions and provide credit and grants to deep tech startups.
India’s deep tech funding is growing
In terms of scale, India remains an emerging rather than dominant deep tech market. Indian deep tech startups have raised a total of $8.54 billion to date, but the latest data points to renewed momentum. Indian deep tech startups raised $1.65 billion in 2025, a sharp rebound from $1.1 billion in each of the previous two years after funding peaked at $2 billion in 2022, per Tracxn. The recovery suggests growing investor confidence, particularly in areas aligned with national priorities such as advanced manufacturing, defense, climate technologies and semiconductors.
“Overall, the uptick in funding suggests a gradual move towards longer-horizon investments,” said Neha Singh, co-founder of Tracxn.
By comparison, US deep tech startups raised about $147 billion in 2025, more than 80 times the amount invested in India that year, while China accounted for about $81 billion, data from Tracxn shows.
The difference highlights the challenge India faces in building capital-intensive technologies, even with its wealth of engineering talent. So the hope is that these moves by the Indian government will lead to more investor participation in the medium term.
A longer lasting signal
For global investors, New Delhi’s framework change is read as a signal of long-term policy intent rather than a trigger for immediate shifts in allocation. “Deep tech companies operate on a seven-to-twelve-year horizon, so regulatory recognition that extends the lifecycle gives investors greater confidence that the policy environment won’t change mid-journey,” said Pratik Agarwal, partner at Accel. While he said the change would not change allocation models overnight or completely eliminate political risk, it added to investors’ comfort that India is thinking about deep tech on longer time horizons.
“The change shows that India is learning from the US and Europe on how to create a patient framework for border building,” Agarwal told TechCrunch.
Whether the move will reduce the tendency of Indian startups to shift their headquarters abroad as they scale remains an open question.
The extended runway strengthens the case for building and staying in India, Agarwal said, although access to capital and customers still matter. Over the past five years, he added, India’s public markets have shown a growing appetite for venture-backed technology companies, making domestic IPOs a more credible option than in the past. That, in turn, may ease some of the pressure on deep tech founders to incorporate overseas, although access to late-stage procurement and capital will continue to shape where companies ultimately scale.
For investors backing long-term technologies, the ultimate test will be whether India can deliver globally competitive results. The real signal, said Kumar of Celesta Capital, would be the emergence of a critical mass of Indian deep tech companies succeeding on the world stage.
“It would be great to see ten globally competitive deep tech companies from India achieve sustained success over the next decade,” he said, describing that as the benchmark he would look for in assessing whether India’s deep tech ecosystem is maturing.